New South Wales Supreme Court CITATION : Powell v Aymkone Pty Ltd [2008] NSWSC 1270 HEARING DATE(S) : 20 November 2008 JUDGMENT DATE : 28 November 2008 JUDGMENT OF : Sackville AJ at 1 1. Grants plaintiff leave to file amended statement of claim in court. 2. Grants plaintiff leave to file a second further amended statement of claim on or before 28 November 2008. 3. Directs the defendants to file any amended defence on or before 8 December 2008. DECISION : 4. Directs the Plaintiff to file any further affidavit in opposition to defendants' motion for security of costs on or before 4 December 2008. 5. Directs both parties to approach the Deputy Registrar in Equity to obtain a hearing date for the defendants' motion for security for costs. 6. Directs both parties to file an outline of submissions concerning the costs of the amended motion filed by the defendants on 20 August 2008 on or before 4 December 2008. 7. Lists the matter for a directions hearing on 9 December 2008. CATCHWORDS : PROCEDURE – Application for dismissal of proceedings on grounds of abuse of process – whether alleged inability to obtain a fair trial can be dealt with in the context of a summary dismissal application - whether earlier proceedings between different parties creates an "Anshun estoppel" or attracts similar principles LEGISLATION CITED : Civil Procedure Act 2005 (NSW) CATEGORY : Procedural and other rulings Cleary v Jeans [2006] NSWCA 9 General Steel Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1965) 112 CLR 125 Jamieson v R [1993] HCA 48; 117 CLR 574 CASES CITED : Kendall v Hamilton (1879) 4 App Cas 504 Petersen v Moloney [1951] HCA 51; 84 CLR 91 Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45 Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; 53 NSWLR 198 Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 Ernest Harry Powell (Plaintiff) PARTIES : Aymkone Pty Ltd (First Defendant) John Cleeves Pooley (Second Defendant) Betty Marjorie McLean (Third Defendant) FILE NUMBER(S) : SC 5233/2004 COUNSEL : GT Bigmore QC and Mr H Aizen (Plaintiff) AF McInerney (Defendant) SOLICITORS : Maitland Lawyers (Plaintiff) Foulsham & Geddes Lawyers (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Acting Justice Sackville 28 November 2008 5233 of 2004 ERNEST HARRY POWELL –v- AYMKONE PTY LIMITED & ANOR JUDGMENT 1 HIS HONOUR: In these proceedings ('the NSW proceedings"), the plaintiff, a resident of the United States, seeks relief against two defendants, Aymkone Pty Ltd ("Aymkone") and Mr J C Pooley, a director of Aymkone. At the relevant times, Aymkone held a securities dealer's licence which enabled it to operate managed fund accounts and other investment facilities. THE PROCEEDINGS The Current Pleading 2 The plaintiff's current pleading in the NSW proceedings is the Further Amended Statement of Claim ("FASC"), filed by leave on 20 November 2008. The plaintiff alleges that in November 1999, he instructed Aymkone and a Mr Camm, a resident of Queensland, to purchase shares in Cellnet Telecommunications Group Ltd ("Cellnet") using moneys provided by the plaintiff in the Australian dollar ("AUD") equivalent of USD310,000 ("the Funds"). The plaintiff pleads that Aymkone did not implement the instructions concerning the Funds and did not purchase the shares. 3 The plaintiff also pleads that Aymkone and Mr Pooley received and held the Funds on trust for Mr Powell. In the alternative, the FASC alleges that Mr Pooley knew that the Funds were being used by Aymkone contrary to Mr Powell's instructions. Accordingly, so the plaintiff pleads, Mr Pooley was a knowing participant in Aymkone's breach of trust and liable to account for the Funds and any profits derived thereon. The Motion 4 By a Further Amended Motion ("the Motion") filed on 20 August 2008, the defendants seek the following relief: (i) the proceedings be dismissed as an abuse of process; (ii) alternatively, the proceedings be stayed permanently as an abuse of process pursuant to s 67 of the Civil Procedure Act 2005 (NSW) (which empowers the Court to stay any proceedings before it, either permanently or until a specified day); (iii) the defendants have leave to file a cross-claim; (iv) the plaintiff be restrained from prosecuting the proceedings against the defendants until the plaintiff returns certain documents said to have been obtained by the plaintiff's representatives inappropriately from Mr Pooley; and (v) the plaintiff provide further security for costs in the sum of $50,000 (the plaintiff having previously provided $30,000 as security for costs). 5 There is some urgency about dealing with the Motion as the proceedings have been listed in February 2009 for the purpose of taking evidence from the plaintiff, whose health is apparently fragile. 6 The defendants read a substantial number of affidavits in support of the relief sought in the Motion and also tendered voluminous documentation. They relied on no less than four sets of written submissions some 130 pages in length, together with many more pages of annexures and supporting material (in addition to the evidence). The plaintiff also read affidavits and tendered documentary material, although the material on which he relied was less extensive than that of the defendants. ABUSE OF POWER I 7 The defendants have perhaps created something of a rod for their own backs seeking summary dismissal or a permanent stay of the proceedings on the ground that the plaintiff's claim is "manifestly groundless and bound to fail" (General Steel Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1965) 112 CLR 125 at 129 per Barwick CJ and that, in any event, the defendants "have unanswerable defences to [the plaintiff's] claim". 8 One of the many arguments advanced by the defendants was that the plaintiff's legal representatives engaged private investigators who used (so it is alleged) dubious tactics to persuade Mr Pooley to part with certain documents crucial to his defence. The defendants contended that the inappropriate conduct by the plaintiff's representatives or agents warrant orders summarily dismissing or permanently staying the proceedings, although it is not entirely clear why the plaintiff should be penalised for what is alleged to have been inappropriate conduct by his representatives or agents. An associated contention was that the plaintiff failed to discover many of the documents improperly obtained from Mr Pooley. Without access to these documents, so the defendants argued, they will not be able to receive a fair trial. 9 Mr McInerney, who appeared for the defendants, contended that each of these arguments should be addressed in the context of a summary dismissal or permanent stay application in which (as he acknowledged) the Court would apply the principles stated in General Steel and similar cases. The difficulty with this proposition is that the factual bases for the submissions are strenuously disputed by the plaintiff. Affidavit evidence read on behalf of the plaintiff denied improper or inappropriate behaviour by his representatives and maintained that the plaintiff's representatives do not have any documents obtained from Mr Pooley other than one document which has been discovered. Serious factual disputes of this kind cannot be resolved in the context of a summary dismissal application, which depends on a demonstration that the plaintiff's case is essentially hopeless and thus cannot succeed. 10 If the defendants wish to contend that the plaintiff's case should be dismissed or permanently stayed on the grounds that: (i) the defendants cannot obtain a fair trial because the plaintiff removed critical documents from Mr Pooley and has failed to provide or discover them; or (ii) the plaintiff's representatives or agents have acted improperly, the defendants should file a motion claiming the appropriate relief and identifying these grounds specifically. It will then be necessary to set aside time - Mr Bigmore SC, who appeared with Mr Aizen for the plaintiff, suggested three days would be required – for a Judge to hear evidence and make findings on the disputed questions of fact. On the basis of those findings, the Judge will then be able to determine whether the defendants have established that the proceedings should be dismissed or permanently stayed on these grounds. 11 The defendants' application to file a cross-claim is related to the same allegations of improper conduct and the plaintiff's failure to discover documents taken from Mr Pooley. The foreshadowed cross-claim seeks orders, among other things, for delivery up of the documents and restraining the plaintiff and his solicitor from taking any step in the Supreme Court proceedings. The application for leave to file the cross-claim should be dealt with at the same time as the application for summary dismissal or permanent stay of the proceedings on the grounds of alleged improper conduct and the defendants' alleged inability to obtain a fair trial. ABUSE OF POWER II 12 The defendants submitted that the proceedings should be summarily dismissed or stayed by reason of the principles of res judicata or so-called Anshun estoppel (Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589). These contentions were based on what were said to be similarities between proceedings instituted by the plaintiff in the Supreme Court of Queensland against Mr Camm ("the Queensland proceedings") and the NSW proceedings. The plaintiff obtained judgment against Mr Camm in the Queensland proceedings, although the defendants' submissions do not rely solely on the effect of that judgment. The Queensland Proceedings 13 The plaintiff's case against Mr Camm in the Queensland proceedings was pleaded in a Statement of Claim filed on 13 October 2000. The plaintiff sought damages for breach of contract and an account of moneys derived by Mr Camm from the use of USD310,000 allegedly provided to him by the plaintiff for the purchase of shares in Cellnet. He also sought a declaration that any sum standing to Mr Camm's credit with Aymkone represented the whole or part of the proceeds of moneys invested by the plaintiff with Mr Camm. 14 The Statement of Claim pleaded that between September and November 1999 the plaintiff and Mr Camm made an oral agreement whereby Mr Camm was appointed the plaintiff's agent to purchase shares in companies listed on the Australian Stock Exchange ("the First Agreement"). Pursuant to the First Agreement the plaintiff caused the sum of USD310,000 to be forwarded to Mr Camm's account with Aymkone and that sum was duly converted to AUD$483,393. In January 2000, the plaintiff instructed Mr Camm to liquidate the investment but Mr Camm, in breach of the First Agreement, did not do so. 15 The Statement of Claim also pleaded that the plaintiff and Mr Camm entered into an agreement in Noosaville, Queensland, on 27 March 2000 ("the Second Agreement"). By the Second Agreement Mr Camm agreed to pay the plaintiff the AUD equivalent of USD310,000 within 30 days. The Second Agreement provided that certain annexed accounting documents could be used for future reconciliation of other amounts due from Mr Camm to the plaintiff. The balance of moneys due by Mr Camm to the plaintiff, being the profit realised on the Cellnet shares and any other profits arising from the investment of the plaintiff's moneys, was to be accounted for by Mr Camm and paid to the plaintiff within a reasonable time. The Statement of Claim alleged that Mr Camm, in breach of the Second Agreement, had paid only A$6,004.80 into the plaintiff's account and had refused to account for any profits. 16 On 30 August 2002, de Jersey CJ heard and determined an application by the plaintiff for summary judgment against Mr Camm for the AUD equivalent of USD310,000, less the part payment of A$6,004.80. It is important to appreciate that the application for summary judgment was based solely upon the Second Agreement between the plaintiff and Mr Camm and did not rely on the First Agreement. 17 de Jersey CJ entered judgment for the plaintiff for $A556,200.49, being the AUD equivalent of USD310,000 (less $6,004.80), applying the conversion rates applicable on 30 August 2002. His Honour noted that the judgment did not resolve the whole of the proceedings "because there are other claims possibly arising from the original arrangement between the parties". The balance of the proceedings was adjourned. 18 Mr Camm appealed to the Queensland Court of Appeal against the summary judgment. On 15 August 2003, the Court dismissed the appeal. The Court noted that the principal defence advanced by Mr Camm was that he was not the correct defendant, since any agreement had been made by him on behalf of the Stirling-Camm Trust, of which he was appointor. The Court rejected this and the other arguments advanced on Mr Camm's behalf, observing that the Second Agreement: "appears to have been a settlement of the parties' differences over an earlier agreement [and] was clearly between [Mr Camm] and [the plaintiff]". Subsequent Events 19 It appears that in about September 2002, a bankruptcy notice was served on Mr Camm. Thereafter discussions took place between Mr Camm and the plaintiff's solicitors relating to payment of the judgment debt, although the discussions no doubt were influenced by the pendency of Mr Camm's appeal. In any event, they did not bear fruit. Ultimately a sequestration order was made against Mr Camm's estate on 19 November 2003, but it seems that the plaintiff was unsuccessful in recovering any moneys from Mr Camm or his bankrupt estate. 20 The plaintiff took no further steps in the Queensland proceedings but instead initiated the NSW proceedings on 24 September 2004. The Statement of Claim filed on that date named three defendants: Aymkone, Mr Pooley and Ms B M McLean, the last in her capacity as trustee of the Stirling-Camm Trust. 21 I gave leave to the plaintiff at the hearing of the Motion to file the FASC, reserving liberty to the defendants to apply to strike out part or whole of the FASC if so advised. The FASC removed Ms McLean as a defendant from the NSW proceedings. Res Judicata or Election 22 The defendants submitted that the Queensland proceedings operate as a complete bar to the NSW proceedings. Mr McInerney relied on a number of principles including res judicata, Anshun estoppel and the prohibition on collateral attacks on judgments. 23 It is plain that the NSW proceedings cannot be defeated by invoking the doctrine of res judicata. The only party common to both proceedings was the plaintiff. The judgment in the Queensland proceedings was based on a cause of action arising from the Second Agreement, to which Mr Camm (but not the defendants) was a party. The NSW proceedings do not plead any cause of action based on the Second Agreement. 24 The cases referred to by the defendants under the heading of res judicata, such as Petersen v Moloney [1951] HCA 51; 84 CLR 91, suggest that Mr McInerney intended to rely not on res judicata, but on an aspect of the doctrine of election, whereby a judgment against one party who is liable to the plaintiff may constitute a bar to an action against another party on the same cause of action: Kendall v Hamilton (1879) 4 App Cas 504 at 514-515 per Cairns LC. 25 It is not easy to see how this principle could apply in the present case. The judgment obtained against Mr Camm was founded on the Second Agreement. The pleadings in the NSW proceedings do not refer to the Second Agreement. It is true that the Statement of Claim in the Queensland proceedings pleaded an agency agreement between Mr Camm and the plaintiff relating to the investment of USD310,000. But that claim was not pursued to judgment. Moreover, the FASC in the NSW proceedings pleads what appears to be a separate agency agreement between the plaintiff and Aymkone (although the pleading refers to instructions given both to Mr Camm and Aymkone). The claims against Aymkone and Mr Pooley arise out of similar circumstances, but they are not founded on the same cause of action (as is the case where a judgment obtained against an agent is held to be a bar against a later action against an undisclosed principal). 26 Mr McInerney attempted to overcome these difficulties by contending that Mr Camm's liability, if any, under the First Agreement had merged in the Second Agreement. He then submitted that the plaintiff's decision to sue on the Second Agreement in the Queensland proceedings constituted an election to pursue that remedy rather than the inconsistent remedy of an action against Aymkone under the First Agreement. 27 It is far from clear why, assuming Mr Camm's liability under the First Agreement merged in the Second Agreement (a view apparently not shared by de Jersey CJ), the judgment obtained by the plaintiff was inconsistent with the pursuit of his remedies against Aymkone. Any cause of action against Aymkone apparently arose out of a separate agreement between it and the plaintiff, even though the agreement concerned investment of the same sum of money as the agreement between the plaintiff and Mr Camm. It would seem to be open to the plaintiff to pursue such remedies as he may have against Aymkone and Mr Pooley, provided credit is given for any recovery by him from the bankrupt estate of Mr Camm. 28 In any event, as the plaintiff's submissions pointed out, if the defendants are to establish that the plaintiff made an election between inconsistent remedies, the plaintiff's state of mind at the material time will be an important issue. This and other factual issues would need to be explored in a hearing at which oral evidence would be given and tested. The issues cannot be resolved on a summary dismissal application. Anshun Estoppel 29 The defendants' Anshun estoppel argument was based on the contention that it was unreasonable for the plaintiff not to have joined the defendants in the Queensland proceedings but instead to have commenced separate proceedings against them in New South Wales. Mr McInerney drew attention to evidence indicating that the plaintiff's legal advisers appreciated that there was a question as to whether steps should be taken to join the defendants in the Queensland proceedings. 30 The Anshun principle may be applied where a person who should have been joined to proceedings instituted against another party is later sued in separate proceedings by the plaintiff: see, for example, Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; 53 NSWLR 198 (where the second action, if successful, would have resulted in conflicting judgments). However, it is necessary to establish that it was unreasonable for the plaintiff not to have joined the defendants in the first proceedings. 31 In the present case, there is, to put the matter at its lowest, a strong argument that the course taken by the plaintiff in the Queensland proceedings was not unreasonable. The plaintiff's advisers chose the shortest route available to enable him to obtain a judgment against Mr Camm – that is, pursuing a course of action based on the unequivocal terms of the Second Agreement. In the absence of any obvious defence, the plaintiff could seek (and did successfully seek) summary judgment on the basis of his entitlements under the Second Agreement without relying on any breaches of the First Agreement by Mr Camm. 32 After Mr Camm's unsuccessful appeal, the plaintiff pursued enforcement of the judgment against Mr Camm to the point of the latter's bankruptcy. In the meantime, the plaintiff took no further action in the Queensland proceedings, whether based on the cause of action arising out of the First Agreement or otherwise. 33 Once the plaintiff ascertained that he was unlikely to recover anything worthwhile from Mr Camm or Mr Camm's estate, he might have chosen to join the defendants in the Queensland proceedings. Instead, he initiated the NSW proceedings. Up to that point, beyond pleading the plaintiff's case based on the First Agreement, the Queensland proceedings had not presented for determination any issue arising out of the First Agreement. Even if it be assumed that the plaintiff's action against the defendants arose out of the First Agreement, it is difficult to see why it was unreasonable for them to commence the NSW proceedings rather than add the defendants to the Queensland proceedings. After all, it was clear that there was no good commercial purpose in attempting to obtain further relief against Mr Camm. Joining the defendants to the Queensland proceedings would have been little different, in substance, to commencing fresh proceedings against them. It is also difficult to see how the defendants have been prejudiced in any way by the plaintiff's decision to institute fresh proceedings in New South Wales, rather than to join the defendants in the Queensland proceedings. 34 The Anshun estoppel argument advanced by the defendants does not justify summary dismissal or a permanent stay of the NSW proceedings. Collateral Attack 35 Mr McInerney submitted that the NSW proceedings constitute a collateral attack on the judgment obtained by the plaintiff in the Queensland proceedings. The submission appears to rest on the contention that the "sworn evidence relied on by [the plaintiff] in the Queensland Proceedings" is in conflict with his evidence in the NSW proceeding. 36 Again, it is difficult to understand how the NSW proceedings, in which the plaintiff seeks relief against the defendants on the basis of an agency arrangement and knowing involvement in a breach of trust, can be seen as a collateral attack on a judgment obtained by the plaintiff against a third party on the basis of a different cause of action. 37 There are authorities which suggest that in "very exceptional cases" a court might stay proceedings as an abuse of process where: "a party in litigation in [one] court makes a formal and public allegation by way of its pleading which is inconsistent with a formal and public allegation in another forum". Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 at 279, per French J. In the same case, French J observed (at 279) that the: "possible varieties of abuse of process are only limited by human ingenuity and the categories are not closed". 38 An issue might arise as to whether an inconsistency in pleadings, of itself, can constitute an abuse of process, having regard to the function of pleadings. In Jamieson v R [1993] HCA 48; 117 CLR 574 at 579, Deane and Dawson JJ observed (in the context of a criminal case) that the: "traditional nature of … an unverified pleading was not that of a representation or warranty of the objective assertions of fact which it contained. It was that of a written identification and communication of the extent of the plaintiff's claim". See also Cleary v Jeans [2006] NSWCA 9 at [14]-[16], per Handley JA (with whom Young CJ in Eq agreed). 39 Assuming inconsistency of pleadings in two cases brought by the same plaintiff can constitute an abuse of process, I do not think that there is any such inconsistency here. The pleading in the Queensland proceedings alleged an agency agreement between the plaintiff and Mr Camm in relation to the investment of the Funds. The pleadings in the NSW proceedings allege an agency agreement also came into existence between the plaintiff and Aymkone relating to the Funds. The two sets of pleadings may generate some questions about the soundness of the plaintiff's case in the NSW proceedings, but the pleadings are not necessarily inconsistent with each other. 40 Similarly, certain of the affidavits filed in the Queensland proceedings on behalf of the plaintiff might give rise to some questions that could be explored in the NSW proceedings. However, the affidavits to which Mr McInerney referred were not read in support of the plaintiff's application for summary judgment in the Queensland proceedings. In any event, Mr McInerney did not identify any inconsistency or conflict between the affidavits filed in the Queensland proceedings and those filed in the NSW proceedings such as might enliven the doctrine of abuse of process. Much less did Mr McInerney identify any blatant inconsistency or conflict such as would make it appropriate to dismiss summarily or permanently stay the NSW proceedings. ORDERS 41 As I have noted, I granted the plaintiff leave to file the FASC in court. The defendants foreshadowed a submission that the FASC was deficient in that certain material facts were not pleaded. Mr Bigmore did not seriously dispute that the FASC required yet further amendment. Accordingly, I granted leave to the plaintiff to file a second further amended statement of claim ("2FASC") on or before 28 November 2008. I also directed the defendants to file any amended defence on or before 8 December 2008. I ordered the plaintiff to pay any costs thrown away by the defendants by reason of the filing of the 2FASC. 42 The defendants' application that the plaintiff provide further security for costs has not yet been addressed. Since Mr Bigmore indicated that the plaintiff wished to put on further evidence in opposition to the application, I directed him to file any such evidence on or before 4 December 2008. I further directed both parties to approach the Deputy Registrar in Equity to obtain a hearing for the application. 43 I have listed the matter for further directions on 9 December 2008. At that hearing I shall address, insofar as I am able, the question of costs of the Motion. To that end, I have directed both parties, on or before 4 December 2008, to file an outline of submissions relating to the costs of the Motion. 44 The Court: 1. Grants plaintiff leave to file amended statement of claim in court. 2. Grants plaintiff leave to file a second further amended statement of claim on or before 28 November 2008. 3. Directs the defendants to file any amended defence on or before 8 December 2008. 4. Directs the Plaintiff to file any further affidavit in opposition to defendants' motion for security of costs on or before 4 December 2008. 5. Directs both parties to approach the Deputy Registrar in Equity to obtain a hearing date for the defendants' motion for security for costs. 6. Directs both parties to file an outline of submissions concerning the costs of the amended motion filed by the defendants on 20 August 2008 on or before 4 December 2008. 7. Lists the matter for a directions hearing on 9 December 2008. I certify that this and the 16 preceding pages is a true copy of the reasons for judgment herein of the Acting Justice Sackville Associate: Date: 28 November 2008 ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.